Quinn Needs "Luck of the Irish" Selling Budget Plan

Quinn budget raises income tax, license fees

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It's going to cost you more to live in Illinois if Gov. Quinn goes through with a rumored 50 percent hike in the income tax.

Updated at 9:30 AM CDT on Wednesday, Mar 18, 2009

As he boarded a St. Patrick's Day flight from Chicago to Springfield Tuesday, Gov. Pat Quinn acknowledged that he would need the "luck of the Irish" in selling his plan to fill the state's $11.5 billion budget hole.

It begins Wednesday, when the governor asks the General Assembly to increase the income tax rate to 4.5 percent from 3 percent, bringing in $2.8 billion more. He also wants to increase corporate income taxes by $350 million.

[Note: NBCChicago.com will offer live video of Quinn's remarks Wednesday beginning at 11:45 a.m. A statement by Senate President John Cullerton and the response by House Republicans will immediately follow.]

The Chicago Democrat attempted to dismiss the "show-biz" approach of his predecessor after briefing Democratic lawmakers Tuesday night about the $59.8 billion spending plan.

"It's much better to level with the people in a straightforward manner," Quinn told reporters. "The citizens of Illinois want honest leadership and they need straight talk."

Earlier Tuesday, Quinn tried to cushion the crash by emphasizing tax relief in his plan. A family of four making no more than $60,900 would see a tax cut, he said. The governor said he wants to triple the personal exemption -- to $6,000 -- to shield more income from taxes. He said that means a family of four making $24,000 or less would pay no taxes at all.

And he wants to offer parents a sales-tax holiday for back-to-school purchases this summer.

The proposal includes $28.4 billion in general-funds spending, with an increase of $174 million for elementary and secondary education and $40 million more for colleges and universities.

Quinn would start a long-awaited, $26 billion statewide construction plan with a $20 increase for license plates, up from $79, and doubling the $10 price of a driver's license to pay for roads and bridges. Mass transit construction would get a boost from an increase in the vehicle transfer fee.

In all, the increased fees would raise $320 million, which he wants to spend on a statewide construction program to repair roads, bridges and public transportation.

The money would pay the interest on billions of dollars in loans to pay for construction projects.

Quinn opposes the gasoline-tax increase that some legislative Democrats favor.

Quinn may seek a $1 increase in the tax on cigarettes, which now stands at 98 cents a pack, according to documents shown to lawmakers earlier Tuesday. The increase would be spread over two years.

He also promised to "cut the budget big-time" as he seeks to put state government back on solid financial ground. "I want to say to the people of Illinois, we're going to pay our bills."

Documents released Tuesday showed $1.3 billion in cuts by slicing or holding the line on state agency spending by $600 million, requiring employees and retirees to pay more for health care coverage to save $200 million, and picking up $390 million by consolidating services such as combining agencies that handle natural resources and historic preservation.

The governor, just six weeks after taking over for the impeached and ousted Rod Blagojevich, has a tough sales job ahead of him. Most lawmakers are open to tax increases but they need proof to take home to voters.

Republicans are generally opposed to an income-tax increase or a hike in the corporate tax.

Revenue from higher taxes will fall short of projections because people will change habits to shield income, said Rep. Mark Beaubien, R-Barrington Hills. Taxing businesses in this economy, he said, would be devastating.

"People won't expand their businesses, they'll leave the state," Beaubien said. "They certainly won't come into the state. It's very counterproductive if you want to create jobs and help the economy."

A sales tax holiday would also ease the burden. Quinn wants to lift the 5 percent sales tax for 10 days in August on certain school-related items. That would cost as much as $50 million, an amount made up by letting retailers keep less of their service fee for collecting the tax.
The Illinois Retail Merchants Association blasted the idea, saying it comes at the expense of already-suffering retailers.

"One only has to read the newspapers to know that the retail industry is not getting rich, just read the closures, just read the
bankruptcy filings, just read the number of people who are getting laid off," said Dave Vite, the group's president.

Normally, local governments would get a share of any income tax increase. Quinn's plan would keep all the additional money for the state, meaning cities would miss out on $287 million -- something Link said would go nowhere because of protests from city halls across the state.

Quinn also may take $200 million out of a variety of government funds that are supported by special fees and dedicated to particular programs. Such diversions were common under Blagojevich, who was removed from office in January.

The budget blueprint includes another idea favored by Blagojevich: Ending several tax breaks for businesses. The move would save the state about $100 million but lawmakers have rejected the idea in the past.

The variety of increases could pose problems, too, in convincing taxpayers to go along.

"If we have to make some difficult decisions, it would be easier for legislators if we had to deal with one, or at least a
limited number of revenue enhancers, instead of a whole slew," said Sen. John Sullivan, R-Rushville.

Here's a look at major budget ideas being considered by Gov. Pat Quinn, as described by Quinn, lawmakers and a budget outline obtained by The Associated Press:

An increase in the 3 percent personal income tax rate. The new rate could be anywhere from 3.5 percent to 4.5 percent. It could generate up to $4.7 billion.

Tripling the personal exemption, shielding up to $6,000 in income from being taxed. That means a family of four could make up to $24,000 and not pay any state income tax at all.

Raising the corporate income tax to 5.9 percent, up from 4.8. Would generate $175 million.

Keep $287 million from the higher taxes that would normally go to local government.